(Bloomberg Gadfly) — Aetna warned the government in a July letter that it would be financially forced to step back its participation in Obamacare’s individual insurance exchanges if the Justice Department tried to block its $28 billion purchase of Humana.
Guess what happened.
Now, the company is being raked over the coals by politicians after this week saying it will stop selling individual Obamacare exchange plans plans next year in 11 of the 15 states where it had been participating in the program.
It’s easy to see why lawmakers are upset. The move will disrupt the insurance of tens of thousands of low-income Americans and leave some with zero options. But leaving the Affordable Care Act exchanges is a defensible business decision. Aetna expects to lose a bunch of money, at least $300 million in 2016, and so does every other big health insurer (which is why most of them are pulling back, too). A busted merger could heighten losses.
The exchanges need fixing, and required changes aren’t expected to happen any time soon. And if the company uses its participation in a market as a negotiating lever? Fine. That’s nothing new in a regulated industry. The company is saying losses drove its departure, not the DOJ’s decision. But even if it’s a bit of both, the move makes sense.
Aetna’s commitment to the Affordable Care Act has deteriorated rather rapidly. The company trumpeted support for the program in November as UnitedHealth, America’s largest health insurer and the only one of the biggest five that didn’t happen to be chasing a mega-merger, became the first to announce it was reconsidering its exchange participation due to heavy losses. In April, Aetna still intended to expand to 20 states. Over the course of a couple of months that happened to include the announcement of the DOJ’s suit to block its merger, it ended up deciding to pull back.
The letter and the rapidity of the company’s shift suggests there was a political element to its continued participation in the face of losses. Any company in a heavily regulated business needs good relations with the government. It may — to pull a completely random example out of a hat — need to overcome an antitrust hurdle for a mega-merger.